The gaming industry is experiencing significant challenges following the decision by the GST Council to impose a 28% tax on the full player deposit value in online money gaming. This move has led to the closure of gaming startup Quizy and prompted other companies like MPL to make drastic changes to their operations, including cutting manpower.
MPL, one of the leading players in the industry, has announced a decision to reduce its workforce by half in order to cope with the increased tax burden. This decision comes after Quizy's shutdown, where the founders cited the GST decision as a major factor in their closure. Quizy mentioned that the new tax rates would significantly increase their tax burden, making it unsustainable for them to continue operating.
MPL's founders, Sai Srinivas and Shubham Malhotra, explained that the sudden and substantial increase in taxes made it necessary for them to take drastic measures to ensure the company's survival. They emphasized that the impact of such a significant tax increase was too heavy to absorb without making tough decisions, including layoffs.
The gaming companies are concerned that the GST hike will have adverse effects on the industry. They anticipate that it could deter investors from entering the sector and may lead players to migrate to unlawful platforms that operate from foreign locations and avoid paying taxes altogether.
Saumya Singh Rathore, co-founder of another gaming company called WinZO, highlighted the uncertainty that these changes bring to the industry. She noted that even established companies might need to cut costs to weather the storm, which could have negative repercussions for the overall ecosystem. Rathore mentioned that reducing user acquisition budgets, marketing/advertisement budgets, and even manpower costs could be strategies companies adopt to stay afloat.
The gaming industry is navigating a challenging landscape due to the unexpected tax policy changes, and companies are making difficult decisions to ensure their survival. The long-term impact on the industry remains to be seen as companies adapt to the new tax regime and its potential implications.
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